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Exxon has inked a 12-year deal with Danish renewable energy company Orsted to buy 500 MW of electricity produced by solar and wind farms to power its oil production in the Permian, Bloomberg reports.
Although the terms of the contract remained undisclosed, it is the largest such contract featuring an oil company as a party, Bloomberg new Energy Finance commented.
“We frequently evaluate opportunities to diversify our power supply and ensure competitive costs,” Exxon spokeswoman Julie King told Bloomberg in a statement. The company has been the target of a lot of criticism—and lawsuits—regarding its attitude to climate change and renewable energy use. Yet now that solar and wind power is becoming cheaper and demand for the commodity in the Permian is soaring, the time is apparently right for Exxon to start changing.
The electricity Exxon will be buying from Orsted will be produced at two farms, one solar and one wind—both which are still under construction. The Sage Draw wind farm will be completed in 2020 and the Permian Solar farm will be launched in 2021.
The Permian is the shale play where production is growing the fastest and with it demand for electricity is growing, too. Bloomberg reports that just one part of the Permian, the Delaware Basin, consumed 350 MW of electricity this summer, which was triple the consumption three years ago. This amount is enough to power almost 300,000 households and it is set for another triple increase, according to utilities, in the next four years.
Bloomberg earlier this year reported that Exxon was looking to seal a deal for the purchase of electricity produced from renewable sources. At the time, a source close to the company said it was looking for long-term contracts of 12, 15, or even 20 years, for the supply of at least 100 MW.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.